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Big or boutique? For many super-rich families, that is the question. The wealthy have always had advisers to handle their financial affairs, but in the past decade the business of managing wealth has become more complex and the landscape of providers has changed.

As private banks have consolidated, families with sophisticated financial needs have fewer financial institutions from which to choose. Small advisory firms have been wooing private clients and many single-family offices have opened their doors to other families.

Not long ago affluent individuals had two choices: establish a single-family office – as the Rockefellers, Pitcairns and others had done – or become a private client of a big financial institution. Today families with at least $20m in liquid assets are turning to multi-family offices, which look after the investments of handfuls of families. The choice is whether to join an independent MFO or one within a large institution.

“One isn’t better than the other. It really depends on what families are looking for,” says Ed Lazar, president of The Threshold Group, an MFO that caters to families worth more than $200m. The choice is akin to staying in a luxury chain or a boutique hotel.

“There are certain things you trade off in big chain luxury hotel, where you get prestige and depth of service. A boutique has character and attentive staff. It’s a different feeling,” he says.

“A big institution with an em­bedded MFO offers global reach in terms of so much of what they do, a lot of product offering and lots of staff. On the other side is a more intimate setting with personalised service and the idea of not being a number in a large financial institution.”

The Threshold Group was founded in 1998 by Jane and George Russell, whose grand­father started the Frank Russell Company, now known as the Russell Investment Group.

Threshold does more than find investments and help families with decisions on philanthropy and transferring wealth to the next generation. It undertakes what it calls “special projects”, which include helping clients manage their aircraft, yachts and other properties, compile family histories and choose caretakers for private islands.

“We are flexible in customising what we present to the client,” Mr Lazar says. “We take a lot of care in saying: ‘Let’s build you exactly the kind of services you need.’ Sometimes it is narrow and deep, sometimes very broad.”

A decade ago there were only about a dozen MFOs in the US. Today there are from 58 to 130, depending on who you ask.

“We are at the beginnings of a new industry,” says John Benevides, president of the Family Office Exchange, a member-based research and advisory resource. “[The MFO] is the next evolution of wealth management.”

Thomas Livergood, founder and chief executive of the Family Wealth Alliance, a consulting firm that acts as a matchmaking service to help families find the best multi-family office firms for their needs, says MFOs typically serve families that are too large for traditional wealth management firms but too small to have their own dedicated staff. These families are in the $20m to $200m range, although the upper limit is rising. (The ultra-wealthy often handle their financial affairs through dedicated SFOs.)

“There are more choices now than ever and it is very difficult for a family to sort through it,” Mr Livergood says. “These firms are not always household names and the services are not mainstream. Many wealthy families have outgrown their advisers but are not as adept at sorting through the choices.”

While this is a nascent industry, there has been a proliferation of MFOs in recent years. The driving force behind this growth, Mr Benevides says, is the realisation by families that they need a spectrum of services to track their increasingly complex financial, accounting, legal and tax matters and related needs. And on top of that is what the industry calls “family governance”.

Since one size does not fit all, how do families choose? “It really comes to best fit,” Mr Livergood says, “and the requirements of the family, their value system and what they are trying to accomplish.”

There are three segments in the industry, he says. The first comprises institutionally backed firms, such as: Asset Management Advisors, an affiliate of SunTrust Banks; Harris myCFO, part of BMO Financial Group; and US Trust’s MFO unit. In the second segment are MFOs that started out as SFOs, such as the Pitcairn Financial Group and Rockefeller & Company, successor to the family office of John D. Rockefeller. Independent advisers such as Vogel Consulting or Quintile Wealth Management make up the third segment.

“The institutions are strong in private banking and, from a family standpoint, there is more of a feeling of continuity,” Mr Livergood says. “The MFOs are strong with multi-generation families and have trust companies.

“The boutiques are more accounting-based and have it buttoned up in terms of paying bills, doing financial projections and are strong on the financial planning side.”

When faced with a slate of top firms, he adds, the decision often comes down to “family values and chemistry”.

One of the biggest challenges for the industry is finding – and keeping – talent. Because of the boom in MFOs and boutique advisers, demand for client relationship managers is outstripping supply. Mr Livergood says a “chronic shortage of human capital” is the largest constraint to the industry’s growth.

Concerns about staffing go hand in hand with questions about the sustainability of boutique firms and the continuity of their service.

Mr Lazar says Threshold pays close attention to personnel. “One of our business goals is less than 10 per cent turnover every year. Nothing is more offputting to a client than having to introduce a new person into the relationship every few years.”

A key issue for families assessing MFOs is the firm’s ability to manage multi-generational wealth. “Families want to know: ‘Is your MFO going to be there in 30 years?’ ” says Robert Casey, senior managing director for research at the Family Wealth Alliance.

“The other side of the coin is that at large institutions in recent years there has been no continuity and high turnover. The name of the bank changes every three years and every 12 months a client gets a new trust officer.”

One of the challenges in finding the right wealth manager is that the job description has evolved. Where once the focus was on products, now there is a greater emphasis on open architecture and service.

“At the upper end of the market there has been a dramatic change from a product-driven, product-centric approach to a client-driven, client-centric approach,” says Mr Casey. “The old guard professionals who were trained to cross-sell product are completely irrelevant now. Firms need a new breed of adviser, one that is client-centric.”

Two criticisms sometimes levelled at the big institutions is that they provide impersonal service and pitch too many of their own financial products.

“There is a perception that the very high-end institutions will try and push their own product,” Mr Livergood says. “The higher profit margins and economic engine make it tempting. But at the high end it is certainly not as prevalent. The independents seize the perception issue and are stealing market share from the institutions.”

As for impersonal service, Henry Fischel-Bock, a managing director at US Trust and head of its MFO group, dismisses the notion. US Trust, he says, strives to make its clients “feel very special” and to ensure that “the person across the table knows them and their family and has their interest at heart, that they are not just one more number”.

Founded in 1853, US Trust is one of the most venerable names in the wealth-management world and still manages affairs for old-money families. Clients typically need to have to have a net worth of $25m to open an account with the MFO group. The median account size is $150m.

One of the pluses of an MFO that is part of a large institution is scale, which allows the organisation to invest in talent and technology. Mr Fischel-Bock says US Trust’s competitive advantage is “stability, range and depth of capabilities, the boutique-like feel we can bring to bear, and the talent we can attract, train and retain”.

He adds: “We have all of the attributes and advantages of being a big institution and yet continue to feel like a boutique and professional partnership to our clients.”

The focus of US Trust’s MFO group is investment consulting, financial planning and administration of fiduciary structures. “We don’t want to be everything to everybody,” Mr Fischel-Bock says and refers to some of the more customised services that boutique firms offer. “We tend to know people who provide those services and are comfortable giving referrals.”

In the “classic bake-off between large and small”, says Mr Benevides, the decision comes down to several factors. These include: the “like me factor” (does the firm serve clients who are like me?); the “process” (are things happening the right way and in the correct sequence?); the “team structure” (is it the right “fit” in terms of comfort and relationship?); and the MFO’s specific areas of expertise.